Agenda item

An Urgent Item had been added to the agenda to consider the Chartered Institute of Public Finance and Accountancy's (CIPFA) Financial Resilience Review of Worcestershire County Council.  The Leader of the Council and the Head of Financial Management: Adults, Children's, Families and Communities had been invited to the meeting to discuss the review.

By way of introduction, the Leader of the Council made the following points:

·       The results of the review had been made public following an FOI request to all Councils across the country, as part of the fallout from the financial difficulties of Northamptonshire County Council.

·       The slides were originally presented to an internal meeting.  CIPFA had been commissioned to undertake the review by the Chief Financial Officer (CFO) at the time to set the scene on challenges ahead and stimulate debate at the start of the budget setting process.  Although the slides were not made public at the time, the data and information included had flowed through to the budget setting process.  This had been presented to OSPB in October 2017.

·       It was acknowledged that, seen cold without any background context, the slides would prompt a series of questions.  The Leader hoped to be able to allay people's fears about the information included.

Members of the Board were given an opportunity to ask questions.  During the discussion, the following main points were made:

·       The Chairman of OSPB commented that it was clear that this document was what subsequent budget decisions had been based on.  The language in the slides was alarming.  With reference to transparency, he asked why it was not felt to be appropriate to share the findings of the review with Scrutiny Chairmen.  In response, the Leader informed the Board that the information had been presented to an informal meeting of Cabinet and the Council's Senior Leadership Team.  These meetings were held regularly to look at items coming forward and to stimulate debate.

·       The Chairman of the OSPB understood this but asked whether, on reflection, it would have been useful to share the findings with all Councillors at the time they were asked to consider the budget for 2018/19.  It would have been good to share the challenges with elected Members as this may have had an impact on the decisions they were making.  He asked the Leader whether he regretted not making the findings public at the time.

·       In response, the Leader reminded Members that this work was commissioned by the Chief Financial Officer to inform his opinion.  Although the slides were not in the public domain, the information contained in them had informed decisions that were taken in the public domain.  It was never the intention for the slides to become public, but to be used by the CFO to inform the advice he gave to Members.

·       He went on to give the context for the slides, reminding Members that at the time the Council was dealing with the appointment of the DfE Commissioner, the Children's Services demand-led budget overspend, and the recruitment of a new Chief Executive and Director of Commercial and Commissioning.  It was a time of change and the CFO wanted to take the opportunity for a stocktake before giving advice to Members.  Although the slides were not shared, the information in them was made public in October as part of the budget setting process.

·       The Chairman acknowledged the seriousness of the pressures and suggested that it would have been helpful to have cross party support, in particular when speaking to Government Ministers.  The issues raised in the slides would have supported the Council's case when talking to Ministers about the need for greater financial support.

·       The slides referred to the Council's Council Tax Strategy as being 'counter intuitive' and this information should have been in the hands of Councillors when they were making decisions on Council Tax.  The decision on whether to make the information public was the responsibility of the Leader of the Council and not the CFO.

·       The Leader reminded Members that, in October 2017, he had not left anyone in any doubt about the challenges faced.  It was CIPFA's view that the Council should take every opportunity to maximise its income to fulfil its place based agenda.  Significant changes were made to the Council Tax strategy in the light of the CIPFA view as demand-led pressures, particularly in Children's Services, were irresistible.

·       In terms of making the case to Government, the Leader suggested that there was an argument that the demand-led pressures should be better reflected in the formulae.  County Councils and all upper tier authorities were facing more pressures and the formulae needed to reflect this.  There was a need to get Members engaged, on a cross party basis if possible.  This discussion provided a clear opportunity to lobby on this issue.

·       The Leader confirmed that local MPs had not been given a copy of the slides.  The Chairman of OSPB suggested that it would have been useful for MPs (in particular the MP for Bromsgrove) to have seen the slides at the time of the Fairer Funding consultation.

·       The Leader reiterated that the CFO had requested professional advice in order to freshen the debate and help to shape the plan.  The Leader would welcome involvement from OSPB or the Corporate and Communities O&S Panel early on in the budget setting process, starting in the summer.

·       The Vice Chairman reminded Members that the Corporate Business Board would receive lots of presentations as part of blue sky thinking, reflecting things that may or may not happen.  She also pointed out that much of this information was presented in early budget meetings, which were not attended by many Members.

·       The Leader echoed the Vice Chairman's views and made a plea for early engagement from Members.  He also agreed that whoever formed the administration needed to have 'horizon scanning' meetings to look at future issues and formulate thoughts.  It was important to emphasise that the slides were not a reflection of the current financial position but were based on advice given last summer.

·       The Chairman of the Children and Families O&S Panel expressed concern about the CIPFA view that the Council's Transformation saving targets were over optimistic.  She had moved an amendment at Council proposing a greater increase in Council Tax and had been advised that this was premature and might be needed in future years but not yet.  She was now not sure that this was the case.

·       Children's Services was now moving to an Alternative Delivery Model (ADM) and it was a major concern that another deficit was predicted for the current year despite the fact that the previous year's deficit had been taken into the base budget.  Further concern was expressed that in the future the Council would be setting KPIs for the ADM but the ADM would be telling the Council how much money was needed to do the job.  She suggested that, rather than keeping everything within the administration, it would be better to have involved all parties in the budget process, in particular the Scrutiny Panel Chairmen.

·       With reference to the transformation savings, it was no surprise that CIPFA found that some savings were not deliverable.  It was clear following the Ofsted inspection report published in January 2017 that the anticipated savings from the placements budget would not be possible and adjustments were made accordingly.  The Head of Financial Management reminded Members that she had been the Interim CFO in October and it was her job to ensure that the issues raised in the slides were addressed.  She acknowledged that the ADM was one of the current financial risks and sensitivities and reminded the Board that discussions with the DfE in relation to finance were still ongoing.

·       The Leader went on to remind Members that although the previous proposed savings had been written off, there was further pressure in the future and extra contingency had been put into the budget for Children's Services.  It was not yet possible to fully reflect the costs of the ADM as this was still being worked through.

·       A Member of the Board suggested that the slides only told half of the story as there would have been a commentary alongside them to set the context when they were presented to Cabinet.  It was not clear that the information included would have been of use to new Members joining the Council in May 2017.

·       The information in the slides was now almost 12 months out of date and should be seen in the context of the time.  Members were reminded that there had just been a general election and it was not clear for some weeks afterwards who would be forming the Government.

·       Concern was expressed about the cost of the slides.  £30k appeared to be significantly over the top for an exercise of this type and it was suggested that the Council was due a credit note for a substantial part of this.  If the CFO could be asked to get a part of the payment back it was hoped that this could be invested into new resources to allow better budget scrutiny for the coming year.

·       The Head of Financial Management reminded Members that one concern noted in the slides was that the CFO was also responsible for IT.  This responsibility had been removed in October 2017.  In terms of the costs involved, she had an itemised list which gave a breakdown of when the three CIPFA staff were on site and when preparatory work was done.  This might be useful to Members in seeing how the costs were arrived at.

·       The Chairman of OSPB reiterated his view that in June 2017 Members had the right to see information on the true state of the Council's finances.  Although the Leader asked for all Members to get involved, it appeared that he did not trust them (or the public) with the true information.  Residents needed to know the true picture and it was not clear why the Council could not be open and transparent.  The Leader had said that the slides were intended to stimulate debate, but they were only shared with 10 or so Members.  When asked if he regretted not making the slides public earlier, the Leader stated that he did not accept the premise of the question.  The figures included were in the public domain via, for example, October OSPB and Resources reports to Cabinet.

·       The Chairman of the OSPB suggested that the Leader had toned down the language given in the narrative of the slides.  The Leader of the Council pointed out that, although the exact words might not have been used, the messages about risk in the September Cabinet report were clear.

·       A Member of the Board asked how the expenditure on the review had been authorised and whether it had been subject to a process of competitive tendering.  The Leader of the Council confirmed that he was aware that the work had been commissioned and he was content for external advice to be sought.  He informed Members that he would not stand in the way of any statutory officer seeking external advice.  He went on to remind Members that, although the CFO had now left the Authority, at the time the work was commissioned he had no intention of leaving.

·       A Councillor who was not a Member of the OSPB asked whether the OSPB and other Members of the Conservative Group had been made aware of the slides.  He also asked whether the Leader felt that future reports of this nature should be shared.  He pointed out that it was difficult for Members to get involved in budget scrutiny at an early stage if information of this sort was not shared.  He went on to ask how satisfied the Leader was that the 2018/19 budget addressed the points made by CIPFA.

·       The Leader informed the Board that he was confident that the budget was sound.  He acknowledged that there would be changes as the budget rolled out and these would be reported via the Resources report to Cabinet.  Although he recognised that there would be more challenges in the future, he reiterated that the situation as described in the slides was not the current situation.  He informed Members that he was open to ideas as to how Members could get involved in the budget debate.  He would not want to get to a situation where Officers did not feel able to ask for professional advice.

·       The Head of Financial Management reminded Members that development sessions on the budget had been held for Scrutiny Members at the start of the budget setting process in 2017.  Some sessions worked better than others and, although the slides were not shared, the messages from the slides were passed on during the meetings.

·       In response to the question of who knew about the slides, the Leader confirmed that it was only those individuals who were in the meeting, ie Members of Cabinet and Senior Leadership Team.

·       In response to a question about whether the new CFO and the new Chief Executive had been aware of the content of the slides, Members were informed that any senior officers working in local government would have been aware of the difficulties facing upper tier authorities.  Prospective candidates would have known about this and the good news for the County Council was that they did choose to join the management team.  Members were reminded that every shortlisted candidate was offered a phone call with the Interim CFO to discuss any issues in detail.

·       The predicted overspend for 2018/19 was broadly in line with expectations and was being dealt with through capitalisation and minimum revenue provision.  The Leader reminded Members that he believed that the budget was robust, although he acknowledged that there were risks and sensitivities.

·       A further question was asked about the additional £6.4 million required to set up and run the ADM.  Members were reminded that the ADM would not be up and running until next financial year, although there would be some costs incurred in this year.  Key costs would fall in the 2019/20 financial year and financial evaluation of this was still being undertaken, including negotiations on how much funding would be available from the DfE.

·       A Councillor who was not a Member of the Board felt that elected Members should always be kept informed.  She expressed irritation that Members were criticised for the quality of their input to budget discussions when, at the same time, crucial information was kept from them.  It was not sufficient to say that the figures were in the Cabinet Report.  She had also requested copies of the specification for this work and any notes that had been taken of the discussion.  The specification, which had been made available to Group Leaders that afternoon, included provision for a final report if requested, at a cost of £2.5k.  It appeared that this report had not been requested, but the full cost had been paid.

·       The Leader of the Council confirmed that no report had been written as a result of the CIPFA review.  All of the information from the presentation had been taken account of and communicated to staff and Members via reports to Cabinet and OSPB.

·       The Head of Financial Management confirmed that, in the light of the discussion, she would go back to CIPFA to discuss the price of the review.

·       It was confirmed that the previous CFO was a member of CIPFA.

·       In response to a question from the Chairman about the tendering process, the Head of Financial Management confirmed that this had been subject to an exemption which was allowed under the Council's contract framework.  The contract had been within the CFO's delegated authority.

·       It was suggested that it was difficult to believe that no written record was kept of the discussion, given that those attending the presentation would want to pass on the key messages to colleagues in their directorates.  In response, the Leader of the Council reiterated that the purpose of the exercise was to advise and stimulate discussion, something that was not unusual.

·       The Leader was asked how many other presentations of this kind had taken place and how much they had cost.  He expressed concern that this would make authorities reluctant to seek professional advice and would make them more insular, something that he would find regrettable.  In response, a Member suggested that if this information had been shared at the time, the Council could have avoided the recent bad press.  The Vice Chairman of the Board informed Members that she did not agree with this point.

·       The Vice Chairman felt that £29k was a reasonable figure for a review of this kind.  She reminded the Board of the need for 'blue sky thinking' and suggested that there would be many reports of this kind that would never see the light of day.  She felt that to make a financial report public without providing any background context would have been irresponsible.

·       Councillor Middlebrough reminded Members that the Cabinet system had pros and cons.  It could be suggested that a con was that ideas were developed behind closed doors to a degree.  He went on to disagree with the Vice Chairman and suggested that £30k for this report was a 'try on'.  CIPFA's reputation was on the line and he hoped that the Council would be able to negotiate a rebate from CIPFA which the Leader could ring-fence to support budget scrutiny.

Councillor Middlebrough formally proposed that:  the Chief Financial Officer should be asked to negotiate with CIPFA a refund on the amount of money spent on the financial resilience exercise and that refund should be used to support budget scrutiny in 2019/20 and beyond.  This was seconded by Councillor Tuthill.

Before the Board voted on the proposal, Members were given the opportunity to make any final points:

·       The Chairman informed the Board that he agreed with the proposal.  He also agreed that it was a good idea to obtain an external view on the Council's financial situation but was concerned that Members were only able to discuss the content now, when the information was 12 months out of date, rather than at the time.

·       Although the Leader talked about starting a debate on this, it was suggested that the Council should have been using the knowledge of all 57 Councillors to take this forward.  This could be seen as a failure of the Cabinet system.  It was a concern that £30k of public money was given to a reputable organisation but the public's representatives were not given an opportunity to discuss its findings.

·       The Chairman asked whether CIPFA would be invited back to undertake another review of this kind.  A further concern was that, even when the FOI request was received, the Council did not realise that the best approach would have been to make the information public at that point.

·       It was still not clear whether the Leader valued the information in the CIPFA slides.  The Chairman suggested that the information was very valuable and would have had a clear impact on his decision making as part of the budget setting process.  Members were denied the opportunity to have their say.  It would not be possible to build cross-party cooperation on budget scrutiny if Members were not trusted to have the information.  If the Council was to move forward with Scrutiny and the Executive working together, there was a need to trust all 57 Members as they all represented a section of the population of Worcestershire.

·       The Chairman asked whether the Leader regretted not sharing the CIPFA findings and whether any future reports of this nature would be shared with Scrutiny Chairmen and Members in confidence, to help shape their discussions on budget scrutiny.  He asked for a reassurance that in future Scrutiny Chairmen could be given this information (even if it was in confidence) so they would be better able to understand the pressures on the Leader and Cabinet.

·       In response, the Leader informed the Board that he could not possibly agree with the Chairman's assertions.  He felt it was important that administrations of any colour were able to have a robust debate before proposals were made public, and this is what he would continue to do.  It was regrettable that the slides came out without context via the FOI request.  He assured the Board that he was genuinely trying to engage Members to ensure they were aware of the financial challenges faced by the Council.  There was an opportunity with the appointment of the new CFO to ensure Members felt informed in any way they felt was necessary.

The Board then voted on Councillor Middlebrough's proposal with Councillors Bloore, Middlebrough and Tuthill voting in favour.  Councillor Eyre abstained.

The Chairman thanked the Leader of the Council and the Head of Financial Management for attending the meeting.